Cisco Slammed by Ralph Nader ... Again

James Rogers

Monday

Jan 30, 2012 at 12:01 AMJan 30, 2012 at 4:29 AM

Ralph Nader has launched another stinging attack on Cisco, again calling on the networking giant to beef up its dividend.

SAN JOSE, Calif. (TheStreet) -- Consumer advocate Ralph Nader has launched another stinging attack on Cisco(:CSCO) and its CEO John Chambers, again urging the networking giant to rethink its dividend strategy.

Nader, who owns 18,000 Cisco shares, slammed the tech giant's "paltry" quarterly dividend of 6 cents per share in a Reuters column.
Ralph Nader has again called on Cisco to rethink its dividend strategy.

This isn't the first time that Nader has gone after Cisco and its CEO John Chambers over the issue of dividends. Last year, in a CNBC interview, the consumer advocate called on Cisco to pay a one-time dividend of $1 a share, as well as increase its annual dividend from 24 cents to 50 cents a share.

Nader reiterated this call in his Reuters column on Monday. "That is the least Cisco's officers should do for their shareholders, many of whom trusted Cisco for over a decade and relied on management to reverse the tiny rate of return that they received for their loyalty," he explained. "To no avail."

Cisco paid its first-ever dividend last year, although Nader voiced his displeasure at recent comments from Chambers on this topic.

"It is now clear from his latest quarterly announcements and September video briefing for investment firms that Chambers has declined to favor greater shareholder returns," he wrote. "At Cisco's Dec. 7 annual meeting, he parried questions about dividends by noting that top management is always deliberating the best way to allocate company surplus among acquisitions, buybacks, dividends and accumulation. All in all, he has left the distinct impression with shareholders that he still views buybacks more favorably than dividends."

Cisco has bought back $60 billion worth of shares over the past decade, according to Nader, who argues that this has done little for shareholders.

"Most studies show that company buybacks have not increased shareholder value," he wrote. "However, they are used for executive stock options, acquisitions or massaging earnings-per-share numbers. Other data has convincingly shown over the last 40 years that dividend-paying stocks are better for shareholder appreciation than non-dividend-paying companies."

After a run of quarters marred by weak outlooks, Cisco started its recovery last year, and is eying areas such as video, cloud and collaboration technology to drive growth in 2012.

Nader, however, says that the dividend issue remains a hot topic for Cisco's senior management. "We know from inside sources that top Cisco executives are feeling some heat," he wrote. "They say they are debating with some intensity the allocation of liquid assets, and more dividends are in the debate mix. Moreover, they have forgone their 2011 year-end executive bonuses."

"Publicly, however, their stance is unchanged," he added. "Increasing dividends does not appeal to them."

Nader urged Cisco shareholders to take matters into their own hands. "Were owners of just 10 million Cisco shares to contribute a penny a share, they could retain a full-time watchdog advocate for all Cisco investors to press the company bosses every workday to drop their indifference to what their owners truly want and deserve," he said. "Such a penny-brigade initiative would provide an exemplary stimulus for low- or no-dividend-receiving shareholders of Apple(:AAPL), Intel(:INTC), EMC(:EMC), Microsoft(:MSFT), Google(:GOOG), Oracle(:ORCL) and other cash-rich companies sitting on their owners' legitimate desire to share in their company's huge accumulated stash."

Cisco has not yet responded to a request for comment on this story.

Apple stopped paying dividends in 1995, although new CEO Tim Cook has come under pressure to resume payments. Some 70% of respondents to TheStreet's recent poll on this topic said that the iPhone maker should start paying a dividend again.

--Written by James Rogers in New York.

>To follow the writer on Twitter, go to http://twitter.com/jamesjrogers.

>To submit a news tip, send an email to: tips@thestreet.com.

Never miss a story

Choose the plan that's right for you.
Digital access or digital and print delivery.